With climate risk regulation in the development phase, coordination among U.S. securities and derivatives regulators is essential for developing a green taxonomy.
Developing a joint green taxonomy would help financial participants understand what types of assets regulators view as green. The taxonomy would also help them classify assets for an issuer's or borrower's contribution to mitigating or adapting to the impacts of climate change. Once developed, financial institutions could draw on these taxonomies to analyze the impact of their financing and investing activities and align financing policies with them to achieve climate impact goals.
In this regard, the taxonomies and standards already created by other countries could be a possible guide for the green taxonomy being developed in the United States. However, how much U.S. regulators will leverage from these already developed taxonomies is open to debate. Nonetheless, given the considerable amount of work that has already been done in this area, it is unlikely that the U.S. regulators will want to start from scratch.
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